I agree with your analysis, very thoughfully and eloquently expressed.
The passage you and Graham are discussing does touch on a very curious phenomenon in the history of the world - that there seems to be an intermediary stage, after people lose faith in a highest God or higher gods - that they become fascinated by lower gods or demons.
It seems counter intuitive, doesn't it? If you have experience of demons, surely you are more likely to believe in angels and higher spirits?
I suppose that part of explanation lies in that fact that the higher spirits have found it harder and harder to descend. For the lower spirits it is still relatively easy.
But I do find it incredibly dificult to understand that there might be high level initiates who are evil. Surely they would understand the terrible consequences to themselves.
best wishes, Jonathan